TaxTMI 
TaxTMI 
2014 (4) TMI 679
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....ities in the course of a search carried out in the assessee's premises on 14.03.1995 as well as in the premises of the directors and trusted persons, the assessing officer referred the matter to a special audit in terms of Section 142(2A) of the Act. The special audit report, inter alia, reported that there were large number of transactions for which no supporting vouchers were available, that several discrepancies in cash and journal vouchers and changes in the dates of the vouchers were noticed, that there were discrepancies in the adjustments of cash books with cash vouchers, that there were payments made to the Railway staff which were not allowable as deduction under the Act, that several payments were made without obtaining any signature of the recipients, that the assessee did not maintain any stock register and did not disclose any work-in-progress in the balance sheet, that several items of capital expenditure were passed off as revenue expenditure and so on and so forth. In response to the queries raised by the assessing officer on the basis of special audit report the assessee could not give any proper explanation and wherever an explanation was sought to be given, it wa....
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....r as to the taxability of the profits and even if it is assumed that there was an agreement on the part of the assessee for being taxed at the rate of 11% of the gross receipts, it does not follow automatically that the assessee concealed its income. The revenue's appeal to the Tribunal having been dismissed, it is in further appeal before this Court. 6. In our opinion the following questions of law arise for consideration: - (i) Whether on the facts and in the circumstances of the case the Tribunal was right in law in upholding the order of the CIT (Appeals) cancelling the penalty imposed on the assessee for concealment of income under Section 271(1)(c) of the Act? (ii) Whether the view of the Tribunal that the assessee's acceptance of the profit rate of 11% was only a conditional proposal and made with a view to buy peace and avoid disputes, is a reasonable view or is it perverse? 7. We have considered the rival contentions. While the revenue assails the order of the Tribunal on the ground that after the judgment of the Supreme Court in the case of MAK Ltd. Data P. Ltd. vs. CIT, (2013) 358 ITR 593 there is no question of the assessee offering income "to buy peace" and that in....
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....ssessee chose to declare its income at an estimated 3% of the contract receipts of Rs.20,30,74,024/-; no attempt was made in the course of the assessment proceedings to justify the said estimate. The assessing officer, armed with the seized material and the special audit report, did comply with the rules of natural justice and called upon the assessee to justify the income returned and explain the discrepancies and irregularities noticed by the special auditor. When the assessee was unable to do so, the assessing officer had no option but to make an estimate of the profits by adopting a percentage sufficient in his opinion to cover the discrepancies revealed by the special auditor and the seized material. In doing this, he committed no error; he also committed no error of law in concluding that there was gross or wilful neglect on the part of the assessee in failing to return the correct income. The burden to show the contrary was, according to the assessing officer, on the assessee which the assessee failed to discharge. 9. The learned counsel for the assessee is not right in his contention that whenever an assessment is made by applying a flat rate of profit to the declared turn....
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.... careless manner. It may be that, in some circumstances, an assessee may have to estimate its income, but if so, such estimate should have some basis therefor. An assessee cannot escape its responsibility or escape penal action merely by filing a return showing an estimated income but without there being any real basis for that income." (underlining ours) 11. In that case the penalty was ultimately cancelled by this Court on the ground that there was no fraud or gross or wilful neglect on the part of the assessee and that the Tribunal's finding to the contrary was vitiated by failure to consider certain material facts. 12. We are bound by ratio of the decision of this Court. The number of discrepancies and irregularities listed by the special auditor in his report which are reproduced in the assessment order bear testimony to the fact that the books of accounts maintained by the assessee were wholly unreliable. If they were so, there can be no sanctity attached to the figure of gross contract receipts of Rs.20,30,74,024/- on which the assessee estimated 3% as its income. It is true that the assessing officer did not enhance the figure of gross receipts but that is not because he ....